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8 types of insurance you don't need

Life is risky, but that doesn't mean you should pay for insurance policies and warranties that aren't necessary.

By Stacy Johnson Jun 4, 2012 5:38PM

This post comes from Angela Colley at partner site Money Talks News.


Money Talks News on MSN MOneyImagine you've flown into town to attend a friend's wedding. You're driving down the highway in a rental car, with your dog by your side, chatting (hands-free, of course) on your cellphone.


Insure all that and it's possible that you and your friend have wasted hundreds of dollars.


Do you buy travel insurance? Rental car insurance? Pet insurance? Cellphone insurance? And did your friend buy wedding insurance? Life has risks, and paying to protect yourself makes sense -- health insurance to meet big hospital bills, for example, or homeowners insurance to cover catastrophe. But in the video below, Stacy Johnson looks at five types of protection you probably shouldn’t buy, or only after careful consideration. Check it out, then read on for more.

Here's more detail, plus a few other types of protection often not worth the money:


Identity theft insurance

Identity theft insurance doesn't protect you from becoming a victim, or sometimes even replace money lost. The insurance only covers some of the expenses you accrue dealing with identity theft, such as the cost of mailing letters to your creditors and maybe some legal fees. It costs $20 to $100 per year, plus a $100 to $1,000 deductible, according to MSNBC.


Instead of paying for extra insurance, see if your credit card company offers identity theft recovery services. Some companies, like American Express, help you free of charge.


If your card doesn't come with it, you can still protect yourself. The Federal Trade Commission has a list of steps to take if you've been victimized by identity theft, including placing a fraud alert on your credit reports and canceling affected credit accounts.


Extended warranties

Almost anything you buy these days has an extend warranty option: appliances, electronics, even lawn mowers. According to CBS News, extended warranties cost an average of 15% to 25% of the purchase price. So if you buy a $900 TV, that's $225.


Problem is, not all repairs are covered by extended warranties and you may have to pay shipping costs even if they are covered.


But if you're still considering an extended warranty, do the math first. Call a local electronics repair shop and ask how much they charge to fix a common problem with whatever you're buying. If the price quote is less than the cost of the extended warranty, buying one doesn't make sense.


Home warranties

Buying a warranty will cost $200 to $400 on average. For that money, it's supposed to cover the cost of repairing big-ticket items like a dishwasher, A/C unit, plumbing system, and electrical wiring.


But some consumer advocates say home warranties are full of exclusions, and the repair you need may not be covered. As Stacy explained in the video, the home warranty company he used claimed that because his refrigerator's coils were dusty, he hadn't properly maintained it, and it voided the coverage.


Pet insurance

I was unsure about getting pet insurance for my dog, so I went online and requested a few quotes. The cheapest coverage I could find was "emergency only" for $11 a month. Full coverage cost $90 a month for a healthy, young dog.


The cheapest plan covered emergencies like a broken limb. The most expensive plan included an annual vet checkup and some medications. But no plan covered everything. I was still going to have to pay out-of-pocket for dental cleanings, grooming, and some illnesses. Genetic conditions and cancer also weren't covered.


While some people swear by pet insurance, many don't. So if you're going to get a pet policy, be very clear about the details.


Cellphone insurance

Image: Cell Water (© Digital Vision Ltd./SuperStock)Unless you're accident-prone, cellphone insurance isn't likely to pay for itself. The insurance costs an average of $5.64 a month, according to the Los Angeles Times, and most plans have exclusions -- like not paying for water damage or dropped phones. If you do have a covered repair, you'll pay a deductible depending on the price of your phone. (The deductible for my Android would be $100.)


If you have a smartphone, you probably have a manufacturer's warranty that already covers replacements and repairs. HTC has replaced my phone three times without charge -- no insurance needed.


Wedding insurance

My friend just spent $26,000 on her wedding, which included the venue, dress, photographer, caterer, and everything else that goes into the perfect wedding day.


She could have purchased wedding insurance, which typically covers some types of cancellations, companies going out of business before the wedding, and liability for guests. But it would have cost $320 to $420, according to USAToday.


Instead, she booked through reputable companies, charged purchases to her credit card to get reimbursement protection, and used her homeowners insurance to cover the wedding rings and gifts.


When the wrong flowers arrived, her credit card company issued her a refund. She didn't need extra insurance. You probably don't, either. Before buying this type of insurance, read more about what's covered and what's excluded. Then read the fine print.


Travel insurance

What if you travel overseas and there's a natural disaster? Or civil war breaks out? Some travel insurance might help you safely evacuate the country, but few policies would reimburse the cost of your lost vacation.


Basic travel insurance covers your expenses should you get sick or have an accident while on vacation. But it won't cover you should a health or weather issue force you to cancel your trip. For that you'll have to purchase a more expensive plan that offers cancellation coverage.


According to Bloomberg Businessweek, a basic plan costs 5% to 7% of the purchase price of your vacation. A plan that includes cancellations costs 40% more.


Travel insurance isn't always a bad deal. Depending on your age, health and where and when you're going (e.g., the Caribbean during hurricane season) cancellation or other types of coverage might be prudent. But before you buy, see what your existing policies will cover. Your health insurance might cover you in other countries, and some credit card companies provide free insurance for travel. Ask before you leave.


If you do buy travel insurance, always read the fine print. Travel writer Christopher Elliott recently reported about an elderly couple who had to cancel a trip after purchasing $10,000 of cancellation coverage. They were denied any reimbursement because they failed to purchase enough insurance for the entire cost of the trip: $10,074. (After he intervened, the company agreed to reimburse them.)


Rental car insurance

When you rent a car, the company will try to sell you a "loss damage waiver." For about $19 a day, according to Autos.com, you're protected if you wreck the rental.

But you're probably already protected. If you have full coverage insurance on your own car, it may cover your rental as well, although many policies won't reimburse the rental car company for "lost use" of the rental car while it's being repaired, as well as administrative and other fees.


You might also be covered by your credit card company, if you rent the car with that card. Check with your insurance provider and your credit card company before you buy rental car insurance. When you talk to your card company, be sure and tell them the specific vehicle you're renting. For example, virtually no credit cards provide coverage for pickups or other types of trucks.


Bottom line? Carefully consider these and all types of insurance, and always read the fine print.


More on Money Talks News and MSN Money:


27Comments
Jun 4, 2012 6:43PM
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Although pet insurance is still new to the United States, it has proven to be very popular in Europe. You mentioned that there is no coverage for dental cleanings and grooming - does your own health insurance pay for haircuts? The purpose of insurance is to protect against serious illnesses and injuries. In those terms, $20 a month can offer a lot of protection. Are there limitations - yes. But if you shop around, there are some affordable policies in case something major happens. 
Jun 4, 2012 8:54PM
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Rental Car loss damage waiver is not technically insurance.  When you tell them you don't want insurance watch what they check.   They usually write does not want insurance and have you initial it, but then check waiver.  So you think you are signing a waiver of insurance.  Nope you are buying their damage waiver which is not regulated by your state insurance commissioner.  It is not officially insurance and you just initialied next to the box you thought meant you waived the "insurance"  If you push it hard enough they may take it off, but most of the time it's a lesson learned.  Just be aware that when you are signing that initial contract have them explain everything, If you are not satisfied have the manager bring out the written explanation of what you just signed.   This a big gotcha at car rental agencies and nets them about another $20 per day on your rental.
Jun 5, 2012 9:05AM
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For the most part I agree with the article. But I beg to differ when it comes to travel insurance. I always buy one when traveling to Europe for more than 1 week. It doesn't cost much - $200 in most cases for my wife and I, but it covers bunch of stuff. My hope is that I would never need to use it, but it makes me feel safe. Furthermore, once it even paid off. We were in Europe when the volcano in Iceland was covering European sky with ash and whatever else volcanoes spew up. Hence, we couldn't leave Zurich on schedule. We got stuck there for 3 extra days and had considerable expenses - hotel, food, etc. Fortunately it all had been covered by our travel insurance. At the end we were reimbursed for 99% of what we spent, which was far more than we shelled out for the insurance. So don't be dismissive of it - think twice before deciding not to buy it.   
Jun 5, 2012 8:06AM
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Keep your credit reports frozen. Many people are unaware that if you keep your credit reports frozen by all 3 agencies, nobody can get credit in your name to begin with. You simply un-freeze them when needed. Some states are free, some there are fees. But, whatever the fee, is much cheaper in the long run, than having some schmo, open a card in your name or take over your credit.
Jun 4, 2012 8:54PM
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Big difference between being ins. poor and ins. rich.

 

Every ins. co., good or bad, is this country's biggest rip off. Its next on the list after the housing bubble.. just wait.

Jun 5, 2012 4:12AM
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Apparently the author of this article doesn't travel much.  I travel internationally on a regular basis.  I can tell you right now that travel insurance should NEVER be ignored!!  I have been delayed many times (once even by the massive earthquate/tsunami that hit Japan in March 2011) and that travel insurance paid off.  NEVER travel without it.  You never know what will happen.

Jun 5, 2012 12:38PM
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Who does the research for this stuff? It's awful! First of all, I'm still trying to find a pet insurance policy that costs $90/month. The average policy is $15-25 for cats and $20-30 for dogs for full coverage. Most companies cover genetic conditions, hereditary conditions, etc. 

I also can't figure out these vet discount programs so I did some research that you really should read before you get a vet discount card http://blog.petinsurancequotes.com/2012/06/pet-insurance-vs-vet-discount-programs.html 

Bottom-line: if you're willing to pay anything to save your pets life then you need pet health insurance. And if you write an article about niche insurance products pick up the phone and call somebody in the industry. 

Jun 5, 2012 8:49AM
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I bought pet insurance for my lab at 8 wks for $16.95 per month.  Its the best thing I ever did.  At 6 months old he tore his ACL and at 2 years old he tore his other ACL.  Each surgery was over $2,500.  Sure I had to pay the money up front, but I submitted it to the insurance company and within 10 days of each surgery I  had a check back for $2,200.  Not bad for $16.95 per month.  All I have is accident and illness on the plan.  I don't feel there is a need for the routine coverage.
Jun 5, 2012 1:14AM
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Car rental insurance insurance could be a bargain if your auto insurance doesn't include collision or your personal vehicle has collision but is worth much less than what you are renting.  Say you are

renting a new Chevy Impala and the MSRP is $29,000.  You have an incident and total the rental. You have collision on your 2008 Chevy Impala which is worth $8000. Your insurance will probably cover your accident with the rental vehicle but only up to the $8000 for which your personal vehicle is insured, not the $29,000 cost of the rental. You are liable for the remaining $21,000.

Jun 4, 2012 8:56PM
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do your homework with insurance. google FBIC and learn the best and worst insurance companies. you may be in for a shock. don't fall for those tv ads. esp watch out for that #1 bad faith insurance company. always...i mean always.....record any meetings with an adjuster from them.
Jun 11, 2012 4:07PM
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Put the money you'd spend on insurance in an emergency account instead.  I just had to drop my health insurance because of personal financial difficulties.  Over the course of my coverage, I paid well over $100,000 in premiums, never once went above my deductible, thus I never got any financial benefit from it and they have my money!  I have nothing to show for all those years of payment.  Yes, I realize it was much easier to get a doctor's appointment or be seen in the ER faster when I had health insurance.
I think there should be legislation that says insurance certificates should be simple enough for a high school graduate to read and comprehend, and SMALL print should not be allowed.  Consumers need to know exactly what they are, or are not getting, for the money they pay out.

Jun 5, 2012 10:04AM
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Definitely agree about pet insurance - it's not worth it. I paid close to $700 to VPI in one year. My lab racked up over $1,200 in bills, and they paid less than $100. The three most important things to pet insurance companies are: exclusions, exclusions, exclusions. Better to go with a veterinary discount program; where you know what you're getting yourself into. Cheaper rates (usually less than $100 a year), lower percentage of a discount, and no exclusions. Personally I use Pet assure but I know United Pet Care offers the same service. The only "protection" I'd spend money on is Trojan.
Jun 11, 2012 3:55PM
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If you buy SEARS appliance's,  beware, their replacement / repair warranties ( insurance) STINK'S. they lie, dont show up, charge you for repair calls that are still under waranty, talk in riddles, try to convince you, thats the way the (appliance) is designed to work, a refrigerator that runs 24/7?, BULL.  if you dont believe me, look up sears COMPLAINT page on the net. make sure you have a barf bag,  it will make you sick. absolutly un-believable. sears used to be a trusted company, not anymore. 

Jun 11, 2012 2:35PM
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I have pet insurance and if you dont use it of course you are paying for not using it however my dogs have had some serious issues like ACL repairs in the past and one recently for addision's disease and I pay $25 a month each for 2 pets and my old one at 45 so in my opinion its peace of mind that I dont have to ever decide between euthanasia and medicals.  There are some pet insurance companies that are far better than some of the others.  I go on petinsurance review.com and it tells the ratings so I have to say that I disagree with this assessment.  Dump the wellness coverage however.
Jun 5, 2012 12:48AM
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Why is it that whenever insurance companies make money, they are considered crooks.  Yet, pretty much any other business making a profit is okay?  People treat insurance like a maintenance policy, instead of a catastrophic event policy.  That's a big reason insurance premiums increase year after year---that and the ridiculous amount of fraud out there.  It's not because insurance companies want to make more and more money.  If they weren't in business to make a profit, why be in business at all?  The majority of the insurance companies out there do A LOT for the community also through charitable donations, jobs, scholarships, sponsorships, etc.

 

No one ever wants to put more risk on themselves----what, take a higher deductible and save money, but that means I have to pay more when I file a claim?  Why would I do that?  That's the true meaning of this article which the majority of people are missing---take more responsibility on yourself!!  Save money by putting more risk on yourself.

 

If you want a NON-BIASED website to visit and research insurance appropriately, google iii (Insurance Information Institute). 

Jun 7, 2012 9:06AM
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cell phone insurance on lost and stolen not mentioned? there's no surprise. I know from personal experience what a stolen IPhone would have cost me without cell phone insurance. the Iphone is for my business. good thing I had it.

As far as pet insurance. Most people don't know that the same card you can use for dental work, CareCredit credit card, is also accepted at most vet's offices for animal services. (you have to ask if they accept it). It's cheaper than paying for insurance. I was not making much money and got one with $4000 credit limit just in time for my Boston Terrier who became very ill. 
Asks your vet , they may have cards they accept instead of insurance. (no yearly fees on CareCredit card). 
Jun 5, 2012 1:04AM
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Because insurance is mandatory in many cases UPICK14ME, and being just that, they take advantage of us.

  How can I take more responsibility on myself when I am a "premium" member of my health insurance, but now have to pay to cover the Fat couple sitting at the buffet stuffing their faces for hours who are doomed to have heart disease/diabetes/who knows what....   You think that worker's comp insurance is all clean and green?  Believe it or not, I own a policy that states that I have worker's comp, but am not allowed to file a claim.  It costs my company of partners $500 a year plus audit fees, just to say I have a policy... which, by the way, is mandated by the state... So shuv your poor insurance company boo hoo's up your A$$ and wake up!

Jun 11, 2012 12:43PM
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 It all comes down to one thing...are you tired of the rich getting all the bailouts and us working men getting nothing? Take a look at what I found and see why the rich are trying to hide this for themselves. G00GLE the term ' CRAZY CASH TEACHER ' all one term and click the first site. Go right to the 'PENNY STOCK' page to see what the rich don't want you to know. It is time your family lives the good life and this will help. THIS IS AMAZING!!! THIS IS A MUSSSST SEEE!!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

insurance on lost and stolen not mentioned? there's no surprise. I know from personal experience what a stolen IPhone would have cost me without cell phone insurance. the Iphone is for my business. good thing I had it.

As far as pet insurance. Most people don't know that the same card you can use for dental work, CareCredit credit card, is also accepted at most vet's offices for animal services. (you have to ask if they accept it). It's cheaper than paying for insurance. I was not making much money and got one with $4000 credit limit just in time for my Boston Terrier who became very ill.
Asks your vet , they may have cards they accept

 

Jun 4, 2012 11:10PM
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The majority of people would be better off without paying for ANY insurance and instead saving or investing that money. How else do insurance companies generate profits year after year after year. They always take in more in premiums then they pay out in claims by a LARGE margin.

 

I think it is amazing how many people will play lotto's when the odds are as horrid as they are yet insist on paying for insurance when the odds are completely reversed. My state lotto had 3 to 1 odds the last time I checked and might have gotten a little better, but in no way could it compare to the return I would get playing a game like Craps at a casino when the house only has a 1.2% advantage if played correctly with single bets. Meaning for those that need it spelled out, if I gambled $100 with lotto tickets after 1 drawing I would have $33 at 3 to 1 odds and $50 at 2 to 1 odds on average versus $98.80 compared to Craps. Insurance is the same way. How else do you think they can afford all those advertisements, buildings, offices, claims vehicles, worker's pay, dividends, etc.

 

People would drive better/safer if they did not think that "everything will be alright", "insurance will take care of everything for me". That is until they can find some way or reason to deny your claim. It makes them more money is why they would do it, that is why a insurance corporation exists. TO MAKE MONEY, lots of it, the MORE the better!

Jun 11, 2012 12:34PM
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I dunt luke the petys.  Wen I ran in rthe stamtowqn maraton, the animal;s chase e and tried to bute me in the abkle.  I luke to ran in the stamtioebnw marathisb and alos worjk at the Saint Ann's run9n the cmara wor the shalp.  I also werk at the noise sation and run the cumera dor the sonday massses a tyhe wsaint marlacmys churfch
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